The value of the internet, quantified

Measuring the economic impact of all the ways the internet has changed people’s lives is devilishly difficult because so much of it has no price. It is easier to quantify the losses Wikipedia has inflicted on encyclopedia publishers than the benefits it has generated for users like Ms Mollica. This problem is an old one in economics. GDP measures monetary transactions, not welfare. Consider someone who would pay $50 for the latest Harry Potter novel but only has to pay $20. The $30 difference represents a non-monetary benefit called “consumer surplus”. The amount of internet activity that actually shows up in GDP—Google’s ad sales, for example—significantly understates its contribution to welfare by excluding the consumer surplus that accrues to Google’s users. The hard question to answer is by how much.

The headline grabbing figure from this article on measuring the value of the Internet is $2,600. That's the consumer surplus per user per year of the Internet as measured by two researchers at MIT who looked at how much time the average American spent online and assumed that consumers valued that time online more than their alternatives.

Does that figure sound right? I guess the easiest way to assess that is to ask yourself if you'd pay $2,600 a year for the Internet or not. That sounds like a lot of money, but I reluctantly concede that I probably would.

Maybe it could be included in Amazon Prime?